2# Equity funds, Good option for an impressive return

Definition

Equity funds are a mutual funds scheme, known as stock funds, the money invested in this mutual fund is mainly invested in the share market.

Types of equity funds

Equity funds types is totally depends upon market capitalization so first of all, we need to understand that what is market capitalization.

Market capitalization-

Market capitalization is also known as “Market Cap”

Market capitalization is the total market value of all outstanding shares of a company. It is calculated by multiplying the total number of outstanding shares of the company by the current market price of one share.

Market capitalization = Share price number of outstanding shares.

As an example, suppose there is a company named ABC whose entire 100 shares are traded in the market and the value of one share is Rs 40, then the market capitalization of the ABC company will be Rs 4000.

Here are the common types:

Large-cap equity funds:

  1. Top 1st to 100th company listed on the stock market as market capitalization is known as a large-cap or NIFTY 100.
  2. NIFTY 100 divided into two parts, one is the NIFTY 50 index and another is the NIFTY Next 50 index.
  3. The NIFTY 100 index represents about 76.8% of the free-float market capitalization of the stock listed on NSE as of 29 March 2019.
  4. The NIFTY 50 index represents about 66.8% of the free-float market capitalization of the stock listed on NSE as of 29 March 2019.
  5. The NIFTY Next 50 index represents about 10% of the free-float market capitalization of the stock listed on NSE  as of 29 March 2019.
  6. The fund that is invested in the Nifty 100 is called a large-cap fund.
  7. Moderate risk and Moderate return

Example of Large cap mutual funds

  1. Kotak blue-chip fund.
  2. Aditya Birla sun life Frontline equity fund.
  3. Reliance large-cap funds.
  4. Mirae asset large-cap fund.
  5. Union large-cap fund.

Midcap equity funds:

  • 101st to 250th company as per market capitalization is known as Mid cap or NIFTY 150.
  • The NIFTY Midcap 150 index represents about 12.9% of the free-float market capitalization of the stock listed on NSE as of 29 March 2019.
  • The NIFTY 150 index divided into two parts, one is NIFTY Midcap 50 and another is NIFTY Midcap 100.
  • The NIFTY Midcap 50 represents about 6% of the float market capitalization of the stock listed on NSE as of 29 March 2019.
  • The NIFTY Midcap 100 represents about 6.9% of the float market capitalization of the stock listed on NSE as of 29 March 2019.
  • The fund that is invested in the Nifty Midcap 150 is called the Midcap funds.
  • High risk and high return

Example:

  1. Reliance Growth Fund.
  2. Tata Midcap Growth fund.
  3. Dsp Midcap fund
  4. Axis Midcap Fund.
  5. Invesco India Midcap fund.

Small-cap equity funds:

  • 251st to 500th company as per market capitalization is known as Small-cap or NIFTY250
  • The NIFTY 250 index represents about 6.4% of the free-float market capitalization of the stock listed on NSE as of 29 March 2019.
  • The NIFTY 250 index divided into two parts, one is NIFTY Small cap 50 and another is NIFTY small cap 100.
  • The NIFTY Midcap 50 represents about 2% of the float market capitalization of the stock listed on NSE as of 29 March 2019.
  • The NIFTY Small cap 100 represents about 3.3% of the float market capitalization of the stock listed on NSE as of 29 March 2019.
  • The fund that is invested in the Nifty small-cap 250 is called small-cap funds.
  • Very high risk and very high return

Example:

  1. Axis small-cap fund.
  2. Tata small-cap fund.
  3. Principal small-cap fund.
  4. SBI small-cap fund.
  5. HDFC small-cap fund.

Note:

  • Large-cap, Midcap and small-cap come under NIFTY 500
  • The NIFTY 500 index represents about 96.1% of the free-float market capitalization of the stock listed on NSE as of 29 March 2019.

Large Midcap equity funds:

  • A Large and Midcap Mutual funds are an open-ended equity scheme which invests at least 35% of it is in Large-cap and 35% its asset in Midcap stock each. Remaining 30%, depending upon the fund manager where they want to invest (large-cap or mid-cap)
  • Since a Large and Mid-cap fund invests in both Large and Mid-cap stocks. It can give higher returns than the purely large-cap fund but potentially return the pure Mid-cap fund.

Example:

  1. HDFC growth opportunities fund.
  2. Kotak equity opportunities fund.
  3. SBI large & mid-cap fund.
  4. Tata large & mid-cap fund.
  5. Essel large & mid-cap fund.

Multi-cap equity funds:

  • Investing across large-cap, mid-cap and small-cap, minimum 65% in any equity (large, mid and small). 
  • 35%, depending upon the fund manager where they want to invest (large, mid and small).

Focused equity funds:

  • Open-ended scheme.
  • The scheme focused on a number of maximum 30stocks.
  • Minimum investment equity or equity-related securities 65%.
  • High risk and high return.

Sector funds/ thematic equity funds:

  • A type of mutual fund, which invests in a particular sector or industry said to be sector fund.

Example- banking and financial sector fund, Infrastructure sector, FMCG (Fast moving consumer goods. FMCG related to packaged food), IT sector fund, etc

  • High risk and high return
  • The thematic fund follows themes of any sectors

Example- If we invest in Infrastructure Sector Fund, then there are many sector Involvements in it, so that our invested money gets diversified into many sectors.

Infrastructure sector. (In infrastructure many sectors are involved like the banking sector, agricultural and non-agricultural sector, etc.)

  • This is less diversified compared to sector funds.

ELSS funds (equity-linked saving scheme):

  • Closed-ended scheme.
  • Lock-in period of 3 years.
  • Tax saving fund up to 150000 INR. (Save  income tax under section 80C).
  • Higher return compares to EPF and PPF when we choose a good ELSS fund.

Value funds:

  • A value fund is a fund that follows a value investing strategy
  • It seeks to invest in stocks that are deemed to be undervalued in price based fundamental characteristics.

Property

  1. High margin of safety.
  2. Already at a discount price.
  3. Very difficult to find.
  4. Experience fund manager needed.
  5. Find out the feature cash flow.
  6. This fund is suitable for the long term.
  7. Moderate risk.

Conclusion

This can be a good option with investment purpose. An impressive return can be found here

If you need a Damat account, you can open it by clicking on the link given below.

Upstox

Zerodha

Thanks for reading our post, God bless you all

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